Median household income surges; poverty rate down

Posted: Friday, October 01, 1999

By Merrill GooznerChicago Tribune

WASHINGTON -- The Clinton-era economic expansion established another milestone Thursday when the Census Bureau reported the median household income in 1998 surged 3.5 percent to an all-time high of $38,900, surpassing the previous peak in 1989.

The government's closely watched poverty rate also showed a sharp decline last year. More than a million fewer Americans had incomes below the federal poverty level. While there still were more Americans living in poverty than a decade ago, the percentage in poverty now stands at 12.7 percent, its lowest level since 1979, when it was 11.7 percent.

An economic expansion that, if it continues to next February, will rank as the longest in U.S. history is now showering its benefits on nearly every income group and racial category. The 1998 survey represented the fourth straight year that American families have posted solid income gains.

''We've seen a substantial increase in working people's incomes the past few years, a change from the early 1990s when there was a profits boom and rising incomes at the top but not for anyone else,'' said James Galbraith, an economist at the University of Texas. ''What this report shows is that when we get to full employment, incomes for average and low-income workers go up.''

The only blot on the latest report was among African-American households, whose median income was unchanged from the previous year. However, the group's median still is at an all-time high set in 1997.

Since the rising tide lifted nearly all boats at about the same rate last year, the distribution of income in the United States was left unchanged in the latest census survey. Between 1980 to 1995, the share of total national income going to the top 20 percent of the population grew rapidly while everyone else either stayed the same or declined.

But the disparity in income was far from President Clinton's mind as he stepped to a White House podium Thursday to take credit for the economy's bounty.

''The best news is that these gains are finally being showered on all groups, from the wealthiest to the poorest,'' Clinton said.

The number of children living in poverty also declined last year, although children under 18 as a group remain disproportionately poor in America. About 13.5 million, or 18.9 percent of all children, lived in poverty last year, down from 14.1 million, or 19.9 percent, in 1997. The poverty rate for children peaked at 22 percent in 1993.

However, the poverty rate for children under 6 remained at 20.6 percent last year, virtually unchanged from 1997. ''We welcome the improvements in the U.S. child poverty rate since 1993, but we must also underscore that today's child poverty rate remains 35 percent higher than the low of 14 percent that was achieved in 1969,'' said J. Lawrence Aber, director of the National Center for Children in Poverty.

The census report also evaluated the impact of government benefits on reducing poverty in America. Using an experimental index that takes into account the earned income tax credit, which works like a negative income tax for the poor, the overall poverty rate fell to 12.5 percent in 1998, slightly below the official 12.7 percent rate.

Clinton, hailing the census estimate that the tax credits have been responsible for lifting 4.3 million people out of poverty since 1993, castigated Congress for moving to limit the program. Republicans have proposed delaying payments of the earned income tax credit to help balance next year's budget.

Amid all the good news in the latest report, income inequality was left unchanged. The top fifth of households raked in 49.2 percent of national income in 1998, a statistically insignificant change from the previous year. Other groups also were unchanged: the bottom fifth earned 3.6 percent of income; the second fifth 9 percent; the middle fifth 15 percent; and the fourth fifth 23.2 percent.

The distribution of total national income among the various strata of wage earners has remained fairly constant since 1993. But it grew sharply during the previous two decades and remains at its highest level since the Census began tracking these data in 1947.

That was little changed by last year's wage gains. The least well-off families, those in the bottom fifth, saw their income grow by 2.3, percent compared to 3.1 percent for the middle fifth and 3.3 percent for the top fifth.

''These excellent economic conditions have failed to lower our historically unprecedented rates of income inequality,'' said Jared Bernstein, an economist for the Economic Policy Institute. ''The strongest economy in 30 years (has been) unable to ameliorate this serious economic and social problem.''